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Coronavirus Crisis Impact on Jobs Could Outweigh GDP Impact

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Sunday, April 19, 2020 /12:49 PM / By Fitch Ratings/ Header Image Credit: BBC

The near-term job losses from the coronavirus crisis might be more impactful than implied by the GDP contraction, according to the latest Economics Dashboard from Fitch Ratings.

Following the adoption of stringent lockdown measures in some of the largest developed economies, job losses have surged as some sectors have seen a virtual standstill in activity.

"The sectors hit hardest by lockdown measures are highly labour-intensive and are larger contributors to employment than they are to GDP. Labour market dislocation could amplify the medium-term impact of the crisis," said Marina Stefani, Director at Fitch.

Fitch's economics team has looked at the composition of employment and economic output by industry in the US, the UK and the four largest Eurozone economies to understand the lockdown impact on jobs.

The service sector, likely worst affected by the crisis, is by far the largest employer in all the above mentioned economies except Germany, and accounts for more than 50% of total employment. Within services, the travel, tourism and retail sectors employ more than 20% of the national workforce, reaching almost 30% in Spain. However, the contribution of these sectors to GDP is significantly smaller. The GDP impact of the lockdown might therefore not reflect the full extent of potential job losses as discussed further in Fitch's latest economics dashboard.